Agenda item

BDO - AUDIT PLAN 2019/20 - COUNCIL - 10 Minutes

To receive a report from BDO (External Auditors) presenting the 2019/20 Council Audit Plan.

(TO FOLLOW)

 

Minutes:

 RECEIVED from BDO (external auditors) the London Borough of Enfield Audit Plan 2019/20.

 

1.    David Eagles (BDO) drew the committee’s attention to page 6 of the report highlighting the Audit Risks Overview and page 29, the Fees summary, which has had a lot of developments in the sector over the past few days.

2.    As detailed on page 6 and page 13 of the report, the audit risks overview is trying to bring things together for a snapshot of what BDO are looking at, to identify what is and is not a significant risk. A significant risk is a classification used for audit purposes i.e. valuations are a significant risk due to the huge sums involved.

3.    As detailed at page 7 of the report, the independence and fees summary was reported which included the 2 points at the bottom of page 7.

4.    The following questions, statement and queries raised in response to the report:

a.    Fay Hammond (Acting Executive Director Resources) reported that the comments circulating on social media regarding Enfield Council’s finances are inaccurate, and demonstrate a misunderstanding of the audit process.

Auditors have a statutory duty to report on whether the Council’s finances are sustainable and consequently the audit framework requires an annual judgement on financial sustainability.

The report makes absolutely clear that the last judgement into the Council’s finances by independent assessors showed they are well managed and comply with all legal and regulatory standards.

Enfield Council also has multiple safeguards in place to ensure its finances are effectively managed, the Council finance director is satisfied that all financial frameworks are in place.               

Consequently, I wish to make the Council’s position absolutely clear that its finances are well managed despite ongoing pressures and government spending cuts of £179m since 2010.

b.    David Eagles (BDO) felt it was important to recognise that the report on page 13 is an audit risk assessment about what BDO need to do and look at regarding arrangements in place during 2019/20. Referring to the risk assessment last year, BDO had looked at arrangements in place during 2018/19 and were able to conclude that they were adequate and reflects an unqualified use of resources conclusion for the council. This is a risk assessment and is not a conclusion about where BDO think the council is, it is just saying the area’s BDO need to look at.

c.    A social media page inaccurately claimed that the BDO report of the 2019/20 Audit Plan said that the Council is not financially sustainable.

Fay Hammond made it clear that the council is in a financially robust situation and is effective at managing its finances. The Audit Plan 2019/20 has been mis-interpreted in a mis-leading way in a public arena. The report (point 9 – page 13) mentions an £8.9m deficit for 2019/20. However, the £8.9m budget deficit figure relates to the service overspend which was reported at the 13 November 2019 Cabinet meeting under the 2019/20 Quarterly Revenue Monitoring – Quarter 2 item. The accurately reported deficit, as in quarter 2 is £5.9m, and was already in the public arena.

d.    In reply, to Councillor Gunawardena’s reference to the report regarding the council’s financial viability in the medium term and the savings gap risk of £66.9m for the next 5 years, David Eagles clarified that BDO are looking at this council (and every other council) working its way through each and every year with savings plans, efficiencies, etc. Including the in-year management of the council’s finances, to continue to mitigate those risks. The Audit was signed off last year which meant that the council’s arrangements are adequate and what BDO are trying to ensure is if the council is still in the same position as regards previous years i.e. –

·         What has happened in terms of the in-year position.

·         What the council’s assumptions are for the Medium-Term Financial Strategy for 2020/21.

·         What the council is doing about Brexit.

·         What the council is doing about expectations of government funding.

                      BDO have to look at all of the above to see that the council is making reasonable assumptions about that forecasting, not making the wrong assumptions and are hiding a real issue.

e.    Councillor Gunarwardena was keen to understand, as regards assessing risks, how to get a deeper understanding of making judgements on those risks i.e. Meridian Water Project, Brexit etc. and how value for money & benefits are measured. David Eagles clarified that audit work is carried out and findings are reported back to the committee by the end of July. BDO are aware of these key issues and are expecting them to be taken into consideration by the council in preparing these various documents. BDO do not measure value for money and benefits of these key risks.

BDO do not assess/audit policy decisions, that is part of the political process, but do look at what information members are given to base their decisions on. By looking at documentation the council has as part of their information decision trail and considering wider issues in the sector.

There is useful guidance on the National Audit Office code of practise which provides a specific description of what auditors roles are and guidance notes they have to follow which are mandatory.

BDO would be happy to provide a private session with Audit & Risk Management Members to go through those issues and to clarify some of the expectations.

f.     In response to Cllr Hockney’s question about the compilation of a comprehensive commercial asset list by the Council and if that has affected BDO’s audit process, Fay Hammond clarified that the council is having all its commercial properties assessed so as to work out if it is getting best value from them. Previous work done on valuations has shown that it is an area of risk for the audit and had caused some difficulty with having a full audit trail i.e. lease agreements for the properties. Finance had been working with the property team to ensure there is a full documentation trail.

g.    Councillor Leaver’s comments regarding the issue of simplification notes to published documents i.e. audit plan. That the audit plan is produced by the council’s external auditors (BDO) which identifies the risks. Anything that has been in the public domain on social media has been taken out of context.

This was a BDO plan for the next audit and the risk register covers our risks as a council and are followed. This was about where BDO are on the plan and the committee should be asking if the plan is deliverable and will it be completed on time. If members did not understand information within the audit plan, they could meet with officers before the committee meeting to ask questions or e-mail enquiries to officers.

 

AGREED to note the London Borough of Enfield Audit Plan 2019/20.

 

Supporting documents: